Should the role of chief compliance officer be outsourced?

Compliance concerns have bubbled to the top of the priority list for many companies as government regulators have increased scrutiny. This new paradigm is no problem for bigger companies, who typically have large, experienced compliance departments, but what about smaller companies?

Many small companies have found success outsourcing certain functions, such as IT or accounting, to dedicated firms with plenty of expertise. Since it worked so well in these cases, some businesses have decided to try the same tack with their compliance departments, looking to outsource the role of the chief compliance officer (CCO).

One business sector that has seen success with this model is financial services. Firms in the financial sector are forced to navigate a complex regulatory environment, and smaller firms might lack the necessary experience or staffing to handle these matters. In this case, it behooves companies to look outside, leveraging compliance services firms like Cipperman Compliance Services.

Todd Cipperman founded the company to offer regulatory advice, and clients can count on a Cipperman staff member to serve as their CCO. This allows smaller companies to break off the CCO duties, which are often seen as a “second hat” worn by another company employee.

But there could be drawbacks to outsourcing such an important role. For companies that wish to emphasize ethics in conjunction with compliance, going outside of the firm may send the wrong message. Internal team members would know the company culture better and be able to spread a message of compliance and ethics to all business units.

On the other hand, independent CCOs are less likely to get bogged down in internal matters, like reporting structures, or be handcuffed by existing relationships with executives. Ultimately, smaller firms must make difficult decisions regarding how to deploy their troops, and they may decide that outsourcing is the best course. If they do so, they must perform due diligence with their chosen outsourcing firm and ensure that they still view compliance matters as a high priority, no matter who is handling the paperwork.

Senior Editor and Community Manager

Rich Steeves

Richard P. Steeves is Senior Editor and Community Manager of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A....